ICT Cites Labor Squeeze As Reason for Drop in Earnings

ICT attributes its drop in second-quarter profits to labor shortages, which decreased its production hours per workstation by almost 15 percent.

The teleservices company reported second quarter net income of 2 cents per share with revenues of $27.5 million to $28 million. For the second quarter ended June 30, 1997, the company reported pro forma net income of 5 cents per share, with $22.9 million in revenues.

ICT said its effective pay rate increased during the second quarter as it paid overtime and other incentives to increase production hours from telephone sales and customer service representatives.

"It is a double whammy," said John Larson, an analyst for GS2 Securities. ICT had difficulty finding operators, had to pay higher rates and had to turn away some business because of its inability to fill seats. As a result, revenues were lighter than expected, he said.

"Telemarketing is labor oriented," said Laurie Kolbeins, managing director, Texada Capital Corp., Wayne, PA, an investment banking firm. "When a company can't get callers, its earnings go down and prices start rising. We are at the bottom of a low inflation period; it has to start moving up."

Demand for its services remains strong, said Larson. Plans are under way to open two call centers this month with two more expected to open in the third quarter. Locations will be selected in areas with traditionally higher unemployment levels and lower wages, the company said, including the Appalachian sections of West Virginia and Pennsylvania, Maine and the Maritime Provinces of Canada.

To offset costs from the initiatives, the company is moving ahead with the implementation of digital recording technology which it expects will improve productivity, reduce expenses and freeze corporate support staff additions.